When inequality gets too extreme, then it becomes useless for growth, and it can even become bad because it tends to lead to high perpetuation of inequality over time and low mobility.
Interpretation
Extreme inequality can hinder growth and perpetuate further inequality, limiting social mobility.
This quote by Thomas Piketty illustrates the detrimental impact of severe inequality on economic growth and social mobility. When wealth and resources are disproportionately distributed, it not only stifles development but also creates a cycle that makes it increasingly difficult for individuals to improve their socio-economic status, leading to a stagnation of opportunity and potential.
In practice
In a keynote speech on economic policy, consider using this quote to highlight the risks of ignoring inequality.
Contrary to a tenacious myth, France is not owned by California pension funds or the Bank of China, any more than the United States belongs to Japanese and German investors. The fear of getting into such a predicament is so strong today that fantasy often outstrips reality. The reality is that inequality with respect to capital is a far greater domestic issue than it is an international one.
The main force pushing toward reduction in inequality has always been the diffusion of knowledge and the diffusion of education.
Over a long period of time, the main force in favor of greater equality has been the diffusion of knowledge and skills.
There is one great advantage to being an academic economist in France: here, economists are not highly respected in the academic and intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.
When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.
Having a decent share of the national wealth for the middle class is not bad for growth. It is actually useful both for equity and efficiency reasons.
A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.
There are severe limits to the good that the government can do for the economy, but there are almost no limits to the harm it can do.
There is no doubt that as an economy grows in a great way like India has, that you have to step back and change your tax systems, because you start to get more disparities of wealth.
If you don't talk about families, then it's easy to disembody subprime mortgages and asset securitization and unemployment rates without remembering that every one of those numbers is a million families.
Why does a public discussion of economic policy so often show the abysmal ignorance of the participants?
In a world with weak aggregate demand, countries are engaging in a futile competition for a greater share of it. In the process, they are creating financial-sector and cross-border risks that will become increasingly apparent as countries exit their unconventional policies.
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